Unrest in the Middle Kingdom, and Anti-info in the Melting Pot | The Daily Peel | 11/29/22

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Nov 29, 2022 | Peel #347

Market Snapshot

Good morning, apes.

How's that bank account feeling today? I mean, after this weekend, I'd be surprised if there wasn't a hole in your wallet as big as the bulge in your stomach on Thursday. Don't worry. You're not fat and broke - you're stuffed and contributing to the economy. Keep it up, kings and queens.

Like every other day in 2022, the global order has divulged into (somehow) even more chaos than the day before. There was certainly no shortage of this on Monday, and man, are we hyped up to tell you about it.

market summary


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Macro Monkey Says

The Dragon Gets Fiery

You might think that China and protests go together like Warren Buffett and Dogecoin.

But surprisingly, China is actually no more a stranger to citizen displeasure than you are to trading losses. The thing is, this time - It's big, like really big.

According to reporting going back years from sources like the WSJ, Al Jazeera, and Bloomberg, minor protests on non-ideological grounds (while certainly not common) are actually not unheard of in the Middle Country. What is unheard of, however, is storming down the streets of Beijing, Shanghai, and plenty of other cities while dropping reams of blank white paper along the way.

The white paper, the protestors' chosen symbol of anti-censorship, has become a central piece in the uproar seen in recent days. Kind of like the black squares lathering U.S. Instagram feeds, footage of dissenters holding white pieces of paper has taken the nation by storm.

That being said, the longevity of these protests is far from known or even knowable. The only other time period in the history of the People's Republic of China that saw mass unrest on this scale was at Tiananmen Square in 1989…and we all know how that turned out.

With these competing dynamics at play, markets don't know what the hell is going on. Mass protests in frontier nations are nothing new, but occurring in China, the world's second largest (and probably soon-to-be first) economy, is an absolute bombshell.

Initial reactions were somewhat predictable. The most striking, however, is just how far China's currency has fallen in recent days and the implications of this for global trade. The "World's Factory" is responsible for not only supplying the rest of the world with valuable inputs and beloved goods, but it also plays a huge role in eating up commodity markets like a pre-teen eats Dairy Queen.

Hence, while the Chinese nation seeks to quell CCP-defying protests, the global oil price sold off in spades, declining nearly 3% on Monday and closing around $81/bbl. Sounds great for the gas bill, but much like the expression "when the U.S. sneezes, the world has pneumonia," I have a feeling that this sneezing by China could give the world a lot more than just a runny nose.

Either way, there is far more of what we don't know than what we do. Will these protests cause an easing in the nation's zero C-19 policy sooner than expected? Will Xi and the gang crack down on the protests like an elbow drop from Hulk Hogan? Why don't my parents love m-, wait, my bad, wrong question.

Regardless, it will be a fascinating few days, weeks, and potentially months to follow in China. You could - at this very moment - be witnessing one of the grandest political shifts in modern Chinese history, or, of course, this could also be just another Tuesday. Stay tuned.


Meme of the day

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What's Ripe

Pinduoduo ($PDD) ↑ 12.62% ↑

  • While China may be down bad, Pinduoduo was more up good than almost anyone else in the league. Shares pumped on a stellar earnings report as good ol' fundamentals push geopolitical risk to the side (for now…).
  • The pandemic darling from the East beat the sh*t out of consensus expectations, with EPS coming in at $8.62 and nearly doubling Street forecasts. Meanwhile, revenue smoked Wall Street's guesses by a solid 15.9%
  • Shares approached their 1-year high as the agritech firm just keeps eating.

Helbiz ($HLBZ) ↑ 18.48% ↑

  • For those of us blessed enough to live in cities that allow scooter transpo, you're all too familiar with the red-headed stepchild of the micro-mobility industry: Helbiz.
  • Despite this reputation, shares in the scooter provider bunny hopped their way to an 18.5% jump on news that Founder & CEO Salvatore Palella is backing up the truck to load up on shares.
  • This man really went for it, increasing his share count by 72%. As the saying goes, execs sell stock for a lot of reasons; but they only buy for one!

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What's Rotten

Credit Suisse ($CS) ↓ 6.39% ↓

  • "This thing can't possibly go lower…right??" has basically been the story of Credit Suisse shares all throughout 2022. Yesterday, the stock said, "hold my beer."
  • Shares tumbled another vomit-inducing 6.1% yesterday as the firm's finances got torn apart even more than you did on your last midterm.
  • No major news occurred, but investors sure didn't hide their concerns as bond prices plummeted and CDSs spiked. (Hint: most companies want the opposite to happen.)

Allbirds ($BIRD) ↓ 7.77% ↓

  • Allbirds just can't catch a breather. The running-and-other-shoe maker slipped another 7.8% yesterday on little to no news, demonstrating the horrific levels of bearishness in shares of the newest joiner of the "Down 90% since IPO" club.
  • Alas…if only their stock was as good as their shoes…

Data Peel

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Thought Banana

Vanishing Brain Cells

As one of my professors back in the days of the yore used to obsessively say: "Finance is fun." While this is obviously the case (because then why else are you reading this??), just because it's fun does NOT mean it's for everyone.

In addition to being fun, finance, and more specifically macro risk analysis, can be challenging. No one in human history has found that out harder than a (previously) little-known state representative from Nevada did this past weekend.

In a surefire, first-ballot Hall of Fame member for "Dumbest Tweet Ever," Rep. Jane Adams has decided to perpetuate one of the most mundane yet surprisingly idiotic data points in the economic world for seemingly no purpose other than fearmongering.

The tweet, as shown below, has made its way around Fintwit for far too long now:

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Sure, the idea of "$2 quadrillion" going kablooey is scary. Yet this is exactly why it's so widespread. Fear gets views, it gets clicks & eyeballs, but as the homie Elon once said, "fear is the mind killer."

And in this case, he's exactly right. The above tweet makes absolutely no sense, thankfully pointed out by Fintwit legends like Litquidity and Dr. Parik Patel, and even a second's thought reveals the data shown is basically meaningless. There is a BIG difference between notional value (as the data shows) and market values (you know, the value that MATTERS!)

Take notes, apes. Notional value is nothing more than a summation of all the parts in a category. It is just the addition of numbers without consideration for what those numbers are. Market value, on the other hand, is the adult in the room, accounting for how those different numbers impact each other.

Here's an ELI5 example. If I own $1mn worth of (who am I kidding) *$100 worth of the S&P 500, and then I go buy a put on the $S&P for $100, my notional value and my notional money at risk is $200. But, if I put my brain on, I can see that the puts directly offset my exposure to the index. The market value reflects exactly this, clocking in at $0 in this example.

Okay, rant over. The point is that whenever you see something as apocalyptic and fright-inducing as the lovely Rep's above tweet, take a second look. Go to trusted sources like Dr. Parik, and find out the real answers for yourself. This isn't misinformation; it's anti-information.

The big question: Does social media fearmongering play a material role in setting market expectations?


Banana Brain Teaser

Yesterday How can the number four be half of five?

The Roman numeral for four (IV), which is "half" (two letters) of the word five.

Today - It's 100 bananas off the WSO's Real Estate Modeling Course for the first 10 respondents. LFG!

You are playing a game of dodgeball with two other people, John and Tom. You're standing in a triangle, and you all take turns throwing at one of the others of your choosing until there is only one person remaining. You have a 30 percent chance of hitting someone you aim at, John has a 50 percent chance, and Tom has a 100 percent chance (he never misses). If you hit somebody, they are out and no longer get a turn. If the order of throwing is you, John, then Tom, what should you do to have the best chance of winning?

Shoot us your guesses at [email protected] with the subject line "Banana Brain Teaser" or simply click here to reply!


Wise investor says

"Success in investing comes not from being right but from being wrong less often than everyone else." - Aswath Damodaran



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